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Taxation of VAT incentive for a micro-irrigation system manufacturer

Engagement: SKP was engaged by one of India’s largest multinational micro-irrigation system manufacturers regarding the taxation treatment of the Value Added Tax incentive granted with reference to new investments.

Solution
On analysing the issue, it was concluded that the VAT incentive granted would be a capital receipt, not chargeable to tax. We also opined that the same would not be required to be reduced from the cost of fixed assets.

Value Delivered
Our team evaluated all the facts of the case with the help of more than 50 case laws. After a thorough analysis, the facts were properly presented for an opinion and we secured a favourable opinion from a leading Senior Tax Counsel. The Counsel confirmed our view on both aspects. This resulted in tax savings of INR 1,870 million for our client.